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We're Not in Kansas Anymore: Not-for-Profit vs. For-Profit Management
By Doug Borwick, Ph.D., Founder and Former Director, Not-for-Profit Management Program/Salem College
CEO/Outfitters4, Inc.
©2002 by Doug Borwick. All rights reserved.
Preface
Like the sector about which it is written, this collection of essays may be best
understood by what it is not. It is not intended as "how to" articles on not-for-profit
management. It is not a thorough consideration of the nature of the field. Rather, it
serves to put to rest a regrettable notion which is prevalent in discussions of not-forprofit management. Too many people think that the problems of not-for-profits
would be solved if they were "run more like a business." By that people mean forprofit businesses. There is no question that not-for-profits benefit from rigorous and
thoughtful management. The sector's origins in pure volunteerism have generated a
topsy-like chaos in much of its operation. However, there are substantial and critical
differences between for-profit and not-for-profit management. These differences are
rooted in the essential nature of the not-for-profit world and are insufficiently
understood by for-profit executives and educators of for-profit management. The intent here is to illuminate
some of those differences so greater care can be given to understanding the true management needs of the notfor-profit world.
A second function of this collection is to serve as an introduction to the nature of not-for-profits for those who
work in the field or those who are being cajoled to do so (for example, potential board members). Perhaps the
light shed here will induce calls for more rigor where appropriate and use of a gentler hand where it is needed.
May all who seek to spend some portion of their lives in making their world a better place through service to a
not-for-profit corporation find themselves and their work richly blessed.
NOTE: The term "not-for-profit" is used here as a matter of conscious choice. There is no functional difference
between it and "nonprofit." The latter is by far the more widely used term. The former, while a little more
cumbersome, seems to more clearly reflect the nature of the enterprise.
It's the Mission, Stupid
The Third Sector’s “Bottom Line”
Not-for-profit organizations (often referred to as the third sector--after the government and for-profits) carry
out activities which our society has deemed to be important but which cannot be supported by for-profit
enterprise and cannot be run by any unit of government. The motivation behind the product or service they
provide is the fundamental reason they exist. In contrast, the fundamental "mission" of any for-profit
corporation is to earn a profit for its owners; of the government to ensure the common good and carry out the
will of the majority of the population. It is only not-for-profits that have baseline purposes which are unique to
each organization. In addition, this baseline purpose defines the specific character and content of the
organization's activities. These differences from the other two sectors are critical to understanding not-forprofits; they are so basic as to require an array of management skills which in some cases vary radically from
practices commonly used in those sectors.
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To understand this, a brief elaboration upon the character of the three sectors is essential. For-profit
corporations have owners who are private individuals with a financial interest in the company; the basic
corporate motivation is private gain for those owners; and the benchmark that indicates success or failure is the
balance sheet record of profit or loss. The government has "owners" who are, essentially, all of the governedhowever, its critical responsibility is to the majority of the population which elected it; government's basic
motivation is (at least in theory) the public good; and its ultimate evaluation is conducted at the ballot box. In
contrast, one reason not-for-profits exist is that each has for its basic constituency a minority of the populationthe less-than-a-majority who need or desire their services; not-for-profits were given special legal status
because the work they do furthers the public good; and the benchmark for success in not-for-profits is
faithfulness to the mission. It is this last point, evaluation, that distinguishes not-for-profits from the other two
sectors and which demands unique approaches to management in a number of areas.
Whether it is the spreadsheet or election returns, there is some concrete measure of success in the first two
sectors. In not-for-profits, the "bottom line" is an abstract concept, not easily given to measurement. It would be
possible for a not-for-profit organization to be financially and programmatically "successful" and still be an utter
failure in its fundamental purpose, carrying out its mission. The ephemerality of any not-for-profit mission is the
core challenge for the sector's managers. It is extremely difficult to develop programs which effectively make a
mission incarnate. It is even more difficult, in the throes of day-to-day operations, to maintain focus on the
mission. Successful programs or financial crises develop a reality of their own which, paradoxically, often push
the basic purpose of the organization into the background.
Doing Well by Doing Good
The "moral" reason for faithfulness to the mission is obvious. The government grants tax benefits to not-forprofits (and their donors) to carry out their stated purpose. The pragmatic reasons, while perhaps not so
apparent, may well be more important. Almost by definition, not-for-profits are extremely limited in financial
and human resources. (This concept is expanded upon in the following essay.) This limitation demands laser-like
focus on only activities which best carry out a not-for-profit's mission. "Good" programs which are not the most
effective way of implementing an organization's mission represent a threat to that organization's viability. Such
programs divert a not-for-profit's limited resources from the "best" programs and, additionally, serve to further
"mission creep", the tendency to try to do more things than resources will effectively support.
A further imperative for strict adherence to the central mission can be seen in marketing and development.
Most not-for-profits cannot afford free-standing public relations campaigns. Their public image can only be
projected through their programs. Any program which does not enhance the public's understanding of the
organization and its purpose serves to confuse the public about the nature of the organization. This in turn
makes members of the public disinclined to avail themselves of that organization's services. However, a
potentially more devastating result of public confusion about an organization can be observed in fundraising.
People will not give money to anything which confuses them. Since not-for-profits cannot exist without financial
support from their clients and friends, this is potentially the most devastating of all the consequences of
insufficient attention to organizational mission.
Other Issues
As will be seen in the following essays, there are a variety of fundamental management concepts, rooted in the
importance of organizational mission, that are unique to the Third Sector. The field of volunteer management is
unknown outside this sector. The nurturing of policy makers (board members) who are not necessarily experts
in the enterprise is a "challenge" peculiar to not-for-profits. Additionally, the solicitation of gifts or grants is a
skill unknown to any outside this sector (save struggling relatives).
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It is in the areas of planning, programming, budgeting, and marketing, however, that the greatest pitfalls often
lie. On the surface it seems like they should be skills directly transferable from the for-profit world. While there
are, certainly, similarities, ignorance of the fundamental differences between for-profits and not-for-profits can
quickly lead to serious misapplication of resources and to counter-productive programs or policies.
Conclusion
Incarnating an abstract concept is the fundamental task of any not-for-profit organization. This requires skills
that are unique to this sector. Not-for-profit management requires simultaneous attention to highly abstract
and highly concrete reasoning. The not-for-profit sector, by its nature, attracts abstract thinkers; they need to
pay more attention to "doability" issues. Managers and board members with experience or training drawn from
the for-profit world need to realize that an abstract concept-the mission-is the single most important factor to
consider in every decision they make. And both need to learn the discipline of remembering these lessons when
"in the trenches", faced with the organization's day-to-day survival.
Failure Is Our Middle Name
If what not-for-profits do could be done in the for-profit sector, it would be done there. If it had sufficient
constituency to demand it be done by government, it would be done there. Neither is the case. Nevertheless,
society determined that the work done by not-for-profits is valuable, so the mechanism of the not-for-profit
corporation was created. The sector exists because insufficient revenue can be generated from its activities to
make it self-supporting and because there is insufficient political will to make its activities governmental
functions. The activities of not-for-profits are, therefore, a demonstration of market failure (as described by
economists) and political "failure" (the inability to gain majority support at the ballot box).
At the same time, the not-for-profit sector is a demonstration of much of what is most right about U. S. society.
It is the institutionalization of what Alexis de Tocqueville observed two centuries ago about this country's
voluntary spirit. In addition, it has historically represented a social safety valve which has allowed the U. S. to
weather most social upheavals relatively intact. Without the outlet provided early on by the abolitionist and
temperance movements and, more recently, by the various civil and political rights and advocacy movements, U.
S. history would have been much stormier than it is.
The point of this is to give lie to the nonsense some espouse that if not-for-profits cannot pay for themselves,
they should be allowed to die. Not-for-profits are in existence precisely because they cannot pay for themselves,
and yet the good they do must continue to be done. Arguments can (and should) take place about the good they
do, not whether they should generate self-sustaining earned income.
Economists make a case for not-for-profits in society on the basis of the nature of the goods and services they
provide. Economic theory labels as private goods those things which meet an individual's wants or needs and
which may be purchased individually. Public goods are those things from which we all benefit, but which we
cannot purchase individually (for example, clean air). Not-for-profits generally operate in a realm between the
two called mixed commodities. Much of what not-for-profits do directly benefits individuals and can be
purchased by them, but significant benefits accrue to the rest of society by their existence. A common example
is higher education. This argument can be used to support government subsidies of not-for-profit activities.
However, the argument is presented here simply to point out that broad social benefits do exist in the work
done by not-for-profits.
Occasionally, board members, staff members, or organizational volunteers get discouraged because there does
not seem to be a way to generate sufficient product or service revenue to meet the needs of their not-for-profit
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organization. This is a good example of myopia generated from being too close to the subject. It is true that, in
general, revenue alone cannot cover all operating expenses for a not-for-profit organization. (To be clear, it is
legal--and laudable--for a n-f-p, through a combination of revenue and support, to operate consistently "in the
black.") Revenue shortfalls represent part of the rationale for the organization. If this were not the case,
legitimate questions could be raised as to whether existence as a not-for-profit entity were justified.
Volunteers: Getting More Than You Paid For
Introduction
The not-for-profit sector is sometimes referred to as the voluntary sector. Volunteering to work for any of the
organizations in this sector is commonplace. In contrast, except in rare cases where personal interest is served (
e.g., internships) no one volunteers to work for the government or a for-profit corporation.
The sector's dependence upon volunteers is sobering. If all the work done by volunteers had to be paid for, most
not-for-profits would need to double, triple, or, often, exponentially increase their budgets. It is even more
sobering to realize that not only are not-for-profits dependent upon volunteers for programmatic and staff
support, they are also dependent upon them for their governance. The board of directors is made up of
volunteers and many of the considerations which must be applied to "ordinary" volunteers must be applied to
them as well.
Since every aspect of not-for-profit life, from policy making to envelope stuffing is dependent upon volunteers,
the management of volunteers is a skill which is critical to the management of not-for-profits. It is also one of
many skills which are unique to the sector. Considerable attention must be given to the care and nurturing of
volunteers.
Effective volunteers are invaluable. At the same time, problem volunteers have given rise to the definition of
volunteers as "staff who can't be fired." Numerous other works go into considerable detail about successful
means of dealing with volunteers. (Judy Rauner's Helping People Volunteer and Susan Ellis's From the Top Down
are two good examples.) The issues raised generally fall into two categories: recruitment/screening and
motivation/ reward.
Recruitment/Screening
Recruitment, always a significant issue, has increased in importance because of the stark changes which have
taken place in the "labor" pool. Many of the traditional sources of volunteer services have nearly dried up. It is
no secret that the increase in single parent families has created a group of utterly exhausted men and women
who, at the end of any day are simply thankful for the opportunity to lift their feet off the floor and fall asleep.
The situation is no better for two-adult households due to the fall in earnings growth over the last forty years. In
order to maintain a "typical American lifestyle" which was maintained by a single income in the fifties and
sixties, couples today must have two incomes. These people too arrive home at the end of the day (however late
that might be) just as exhausted as their single-parent peers. These two groups represent what used to be the
dependable core of any volunteer pool in the United States. They are certainly less interested in donating their
time as board members or staff support personnel than was true of their predecessors of four decades ago.
The good news about recruitment may come in the form of aging Baby Boomers. As they near retirement age, a
huge group of skilled, experienced workers will have time available for personal pursuits. While it raises new
management and recruitment issues, this reality must be prepared for.
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Every book or article about effective use of volunteers points out the need for careful screening and training of
the new worker. This is how evaluation mechanisms are established whereby a parting of the ways at some
future date, if it should prove necessary, can be prepared. Care should be taken not to have a carte blanche
approach to accepting all comers as volunteers. Not everyone who thinks they want to volunteer to work for a
not-for-profit organization is a good match. As is obvious from this, however, volunteer management is time
consuming. It is the haphazard, "Y'all come", approach that gives rise to the mixed reputation of volunteer
service.
Motivation/Reward
The motivation and reward structure for volunteer service is, as much as anything else, a retention tool.
Maintaining a good volunteer is vitally important, not only because of the work they do, but also because of the
time invested in recruitment, screening, and training. The key to motivating good volunteers is found in
understanding the individual volunteer's reasons for service. Not-for-profit managers like to assume that the
sole impetus for volunteers to serve is commitment to the organization's mission. That is certainly an important
motivation. However, there are other powerful reasons as well. Some volunteers are seeking to hone
professional skills in preparation for a new career. Some are looking for a new sense of self-worth from
successful service to an organization. Some are seeking to "meet people." (Ann Landers has been suggesting this
for years.) Some are seeking to "network" for the advancement of their careers. (This is especially true of young
board members.) Knowing the motivation of individual volunteers allows the organization to tailor rewards to
their interests. (Some organizations, for instance, honor valued volunteers at social gatherings to which
community business leaders are invited. This form of recognition powerfully serves their desire to "network.")
Conclusion
The management of volunteers is a concern unique to the Third Sector. The key to doing so effectively is careful
screening, evaluation, and rewarding of the individuals who make such a great contribution to the organization.
The difficulty lies in finding a way to leverage the large amount of time which must be given to such
management so that the resulting volunteer work more than pays for the management time devoted to it.
Failure to give that time up front, however, can result in serious loss of time, money, and, sometimes,
organizational reputation in the end. Volunteers are time-consuming but essential. It behooves every not-forprofit to invest the time to utilize them wisely.
Let the Punishment Fit the Crime
The fact that not-for-profit boards of directors are made up of volunteers often gets overlooked in consideration
of them. The individuals who serve on these boards face the same time constraints as any other volunteer. In
addition, the responsibilities of board members have vastly increased over the last two decades. Nurturing
volunteer boards of directors has become a key task of not-for-profit staffs, another task unique to the Third
Sector.
The roles filled by not-for-profit corporation board members are legion. The primary one flows from the
501(c)(3) structure of not-for-profits’ serving to ensure that the organization is indeed furthering the public
good. More specifically, not-for-profit board members have the responsibility to make certain the corporation
adheres to all applicable laws and to set policy on all substantive matters relating to the mission of the
organization. The board is the body that must hold the organization faithful to that mission. Not-for-profit
boards serve to guard the organization's financial well-being and, therefore, they play a vital, hands-on role in
leading fundraising activities. As individuals, most board members lend their expertise to furthering the
organization's goals and serve as speakers for the cause represented by the group.
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The traditional approach to recruiting board members has been a generic-one type fits all-model. Stemming
from the board's fundraising role, organizations seek out the community's "heavy hitters"-donors, corporate
executives, and people with political influence. In addition, a "lawyer slot", and an "accountant slot" (along with
others) have been created to provide the organization with those forms of expertise.
With the financial crisis the Third Sector is facing, every not-for-profit is beefing up its fundraising efforts. Not
only is the competition for donations increasing, the competition for "heavy hitters" on not-for-profit boards has
reached a fever pitch. There are a limited number of such people in any community and their time is even more
limited. The result is either a lack of such people on the board or their presence but with diminished focus
because of the myriad of boards upon which they serve.
The explosion of tasks not-for-profits need filled by their boards places an additional burden upon board
members. A lack of money to buy outside services forces organizations to secure those services from their inhouse resource pool-the board. In addition, each participant in a not-for-profit must have a passion about the
organization's mission. This is necessary in order to maintain the focus required to make efficient use of the
resources which do exist. Generic board members, for all the gifts they can bring, do not, as a rule, possess such
commitment.
The traditional position of board member for a not-for-profit organization has become very complex and
demanding. It can be difficult to find people with the time, energy, and talents to take on the responsibility. The
solutions to the dilemma that this represents must take into consideration both the needs of not-for-profit
organizations and the people who will be asked to assume those roles.
The dominant reality to be considered with regard to potential board members is the "time crisis". The demands
upon their time and the serious competition for available time suggest that, where possible, shorter, projectoriented commitments might be attractive to some potential volunteers who would never consider traditional
board membership.
Not-for-profits need a central policy-making body, a fundraising vehicle, access to expertise, and willing workers
to do the things which staff members cannot. The clear message for the future seems to be that these are
functions which it is unreasonable to ask be carried out by a single group. Some organizations have begun to
move to a multi-part structure to replace traditional boards. They have a board of patrons responsible for
fundraising needs, a board of advisers to provide expertise, and a board of friends to carry out specific tasks on
an as-needed basis. Each is represented, along with the administrative and professional staffs, on a small
executive board serving as the de jure board of directors which handles matters of organizational policy.
The traditional role of a member of the board of directors of a not-for-profit corporation has expanded to the
point where it is virtually undoable. Simultaneously, competition for the time of potential board members has
shrunk the pool of people who can consider any volunteer role in the Third Sector. Structures, such as the one
described above, which take these realities into account, are needed. Such changes might make the vital role of
board member one which can be successfully assumed by a broader range of talented individuals.
Human Capital: A Kinder, Gentler Approach to Employee Relations
Introduction
Not-for-profit organizational structures are unique. "Outsiders" who are not necessarily knowledgeable about
the nature of not-for-profits (the Board of Directors) set policy. Currently, Boards are often dominated by people
from for-profit environments. Their input is invaluable, but their business orientation and background can cause
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difficulties as they evaluate the CEO, set personnel policies, and interact with staff. It is important for the Board
to understand that differences between the for-profit and not-for-profit sectors require approaches to
personnel management which differ from what has been traditional in the for-profit world.
Third Sector enterprises exist because their activities cannot "pass" the market test. They are granted 501(c)(3)
status because this is true and because society deems their work to be valuable. As a result, money will always
be in short supply in not-for-profits as compared with for-profits. In addition, the not-for-profit world is the most
labor-intensive segment of society. It is a collection of service industries wherein the service is primarily
provided person-to-person. Since the expenses of not-for-profits are overwhelmingly centered in personnel,
attempts to resolve budget shortfalls often result in salary/benefit reductions or staff cutbacks. Generally
understaffed and underpaid to begin with, this leads to a dangerous spiral in not-for-profits which has been
described as the accumulation of human debt. (I owe my awareness of this concept to the work of Nello
McDaniel and George Thorn.) Even when there is not an imminent budget crisis, the tendency in not-for-profits
is to attempt to make up for a lack of programming funds by demanding (and receiving) more and more from
personnel.
In addition to low salaries, there is a high degree of responsibility which falls on the shoulders of not-for-profit
staff members. Certainly this is true because of the lean nature of the not-for-profit workforce, but also because
of the nature of the work that is done. Not-for-profits exist because society believes the work they do to be
important for the common good. Staff members at those agencies know this to be true and so, in general, feel a
strong sense of responsibility to their community for their work as well as to the organization.
It is this sense of responsibility felt by the staff members that allows not-for-profits to function at all, in spite of
the difficulties they face. And it is this sense of investment in the mission of the organization that differentiates
many not-for-profit staff members from employees of for-profit corporations. Not-for-profit staff members have
a tendency to be more personally committed to the mission of the organization than their for-profit
counterparts (whose principal interests, understandably, are in salary and advancement opportunities).
Without an awareness of these distinctions between the for-profit and not-for-profit workforce, it is impossible
to address significant issues in personnel management for not-for-profits.
Theories of Personnel Management
As the for-profit world has moved through the portal between the industrial and information ages, it has spent
much time examining its basic principles of personnel management. Tasks which are mechanizable are now
being carried out by machines. The wages of the remaining workforce represent a large percentage of any
company's budget. Thus, workforce efficiency has become the key to increased productivity. Personnel are
being viewed as human capital. Worker turnover represents a serious capital loss, not only of productivity but of
training time and money as well. Considerations of this have led to an alphabet soup of human resources
management concepts: Theory X, Theory Y, Theory Z, and TQM (Total Quality Management) to name a few.
To quickly (and with tongue slightly in cheek) summarize, Theory X is based upon a belief that people do not
really want to work and will only do so if coerced by punishment or reward. Theory Y holds that people want to
do an honest day's work for an honest day's pay and an enlightened boss who is supportive will bring out their
best. Theory Z rests on the assumption that collaborative management without a heavy-handed hierarchy is the
best way to achieve the greatest productivity. TQM is rooted in a conviction that workers having a sense of
ownership (real or otherwise) in the corporation and a spirit of partnership with the customer will yield the best
"bottom line" results.
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By now most human resource managers in the for-profit world give at least lip-service to some "post X"
approach to employee relations, with varying degrees of commitment.
Personnel Management in Not-for-Profits
Employee-friendly post-X management approaches are particularly well-suited to the special concerns about
staff which arise in not-for-profits. Unfortunately, some not-for-profit board members who are from the forprofit world are not from human resources backgrounds and are still inclined to be Theory X types. While
controlling approaches to management still seem to be successful for them at work (and management theorists
are saying that the days in which that will remain true are numbered), it is dangerously counter-productive in
the not-for-profit corporation.
The accumulation of human debt brought on by low salaries and high levels of responsibility typically lead to
rapid burnout. One obvious result of burnout is greatly reduced productivity, forcing the rest of the staff to pick
up the slack, amplifying the burnout spiral for others in the organization. A somewhat less obvious effect is the
huge dollar outlay required for temporary replacement, search, training, and initial inefficiency of new
personnel which follow when a burnout victim leaves.
The obvious solution is to prevent burnout. But since funds are scarce, financial rewards for good work or the
addition of staff to alleviate the load are not options. (Another for-profit reward opportunity, advancement
within the organization, is also missing in most not-for-profits because of the small size of the staff.) The only
remedy available to many not-for-profits is the category of "psychic benefits." Given the financial constraints, it
is mission-critical that the not-for-profit workplace be a pleasant, relaxed environment. Staff must never, except
in the case of gross incompetence, destructive behavior, or insubordination, be motivated by fear for their jobs
or careers. Slash and burn managers must be avoided at all cost. The alternative places the future of the
organization at serious risk.
Outsider Misconceptions/Unconscious (False) Assumptions
To the observer from the for-profit world, there are a variety of assumptions about not-for-profits which are
both common and false. First, the surface appearance of anarchy which many not-for-profit office environments
seem to display often makes outsiders nervous and believe "discipline" is lacking. The generic need for a relaxed
workplace has already been mentioned. However, lack of funds requires extreme creativity in problem-solving.
An atmosphere which encourages the freedom to be outrageous will spawn the greatest number of plausible
options (along with all the implausible ones).
Some people believe that if a person is working for little money, they must not be highly qualified to do their
job. This notion (usually in unconscious form) is patently untrue. The commitment to mission brings many highly
qualified people to not-for-profits in spite of the low pay. Even when a staff member is not ideally qualified, the
organization has an obligation to itself and to that person to provide training and development opportunities for
them. That is always far more cost effective than replacement. (Unless, of course, the person is truly unsuitable
for the position.)
This perception leads to a particularly damaging attitude-one of a lack of respect for the professionalism of the
staff. Citizens of the for-profit world often do not hold not-for-profit staff in as high a regard as their for-profit
equivalents. (This is, again, a largely unconscious attitude.) One need only consider the way in which the CEO of
the United Way is viewed when compared with the CEO of the largest bank in town to realize the truth of this.
Until proven otherwise, outsiders should assume that not-for-profit staff members know what they are doing.
The observer will generally be demonstrated to be correct. The impact upon staff morale of the opposite
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assumption (which is always transparently evident) is devastating, and poor morale in not-for-profits causes
productivity to plummet.
Finally, since much of the work of not-for-profits is foreign to outsiders, board members sometimes have a
tendency to hold staff accountable for the unknowable. There is a (once again, unconscious) assumption that
the staff should have known that the sky was going to fall, and, therefore, heads should roll. Sometimes the sky
just falls.
Psychic Benefits
The most important of the "psychic benefits" which not-for-profits need to provide has already been mentioned.
That is a collaborative environment, characterized by a relaxed manner and loose reins. It is not necessary to
subscribe to "end-of-hierarchy" management principles to create such an atmosphere, it is simply critical that
vertical and horizontal tensions be minimized.
Related to this is an atmosphere of openness and honesty. For the sake of quality decision-making, it is essential
that the staff has access to all information about the organization, with the exception of sensitive issues like
salaries and performance reviews. The greatest efficiency of not-for-profits rests in the free flow of information,
honestly imparted across traditional lines of authority.
Not-for-profits should spend a great deal of time on the nurturing of each staff member. Anything feasible
should be done to aid the individual in areas of professional development and training. Sometimes a board
member is in a position to provide relevant training. Other times an investment in workshops and seminars will
increase their productivity not only by the skills learned but by the sense that the organization values them. The
latter effect may, indeed, be far the more important of the two. In addition, the organization needs to honor the
staff member by providing regular feedback on job performance for the purpose of rewards (such as they might
be) and opportunity for improvement (not punishment). Performance reviews should include the good and, not
just the bad, but the bad along with a supportive plan for making it better. The path to improvement needs to
be paved with carrots rather than sticks.
The issue of perquisites is not well-enough understood in not-for-profits. The most important "perq" available is
flexibility of time-real compensatory time, flextime, personal time, vacations. Since money is scarce, time
represents an attractive alternative, particularly in the effort to avoid burnout. Not-for-profit staff members
should always be included in gala events and celebrations. Bear in mind the Apostle Paul's admonition about not
muzzling the ox as it mills the grain. Also, not-for-profits should be reasonably open-handed with any giveaways
that become available. One organization charges its staff for meals left over from fundraising lunches. The
positive impact on long-term morale which could be gained through institutional generosity of spirit in such
instances far outweighs the short term gain the few dollars earned that way represent.
Individual contract negotiations should not be conducted like hardball in a Turkish Bazaar. While some may find
the gamesmanship involved to be invigorating, the psychic toll taken by the activity is demoralizing. Not-forprofit staff members do not choose their profession "for the money". First offers from management should be
realistic, not insulting. Staff members do not forget the sense of being undervalued which a low-ball offer
represents. This too eventually has a negative impact upon productivity.
Dealings with staff members should always consider both professional and personal concerns. This includes
awareness of home and family issues and reasonable efforts to ease burdens when possible. Not-for-profits
cannot afford to let staff members' personal problems weigh upon the organization, but often very minor
adjustments can greatly help an individual. That example, if fairly undertaken, can encourage the rest of the
staff about "when it's me", boosting long-term productivity.
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Personnel management in not-for-profit organizations should have as its central theme a great concern for the
long-term impact of any proposed action. Short-term "efficiencies" like rationing paper clips are so devastating
to morale and, hence, productivity, that they must be weighed very carefully. Directly related to this is the
impact actions taken (or not taken) with respect to one individual will have upon the rest of the staff. A
particularly good example of this is the not-for-profit manager who, being forced to cut staff to save money,
gave the remaining staff a small raise to help reassure them about their security within the organization.
Without that support, all would have likely been as concerned about where the ax might fall next as with the
organization's tasks. Personnel decisions affect not only the individual involved but the entire staff as well. Any
supervisor who, in presenting bad news, is tempted to say "It's nothing personal. It's just business." should
consider the impact of that not just on the person hearing it but upon the rest of the staff as well. Actions (or
inactions) which negatively affect the sense of job security will be felt in an organization for years as the legend
lives on in memory and saga-telling.
Conclusion
The most important resource any not-for-profit organization possesses is its human capital. The long-term
success of not-for-profits rests in the skill with which they utilize that resource. The differences between forprofit and not-for-profit corporations require substantively different methods of personnel management in notfor-profits than have been traditional in the for-profit world. (However, the future of for-profit human resources
management appears to headed in the same "kinder, gentler" direction that is advocated here for not-forprofits.) Many not-for-profit managers have intuitively taken this approach. However, for others it appears soft
and counter-productive. The aim of this essay is to demonstrate that not only is this way not counterproductive, it is the most efficient path to great productivity in not-for-profit organizations.
Brother, Can You Spare a Dime?
The not-for-profit sector is defined by its need for support beyond directly generated revenue; the process of
seeking such support is unique to the sector. The solicitation of gifts is generally referred to as development,
although the word can have other meanings as well. It should be remembered that the gifts sought do not
always need to be cash. As will be pointed out shortly, goods received can sometimes be as useful as money.
Reasons for Giving
The reasons that a person or institution might want to give to a not-for-profit organization lie at the heart of the
means of successful gift solicitation. As with the reasons for volunteering, the motivations for giving can be
diverse. It is a mistake to assume, as those closest to the organization like to do, that the primary reason is the
mission. Often it is not. Individuals also give to receive recognition, buy access, or assure themselves a place at
the table when decisions are made. Corporations give for these reasons but also to provide a better
environment for their employees, to generate a positive image for themselves, or to reach a particular target
market. (The last of these has become an important area of corporate funding interest and will remain so.)
Appeals for support which do not address these motivations (explicitly or implicitly) will be less successful than
would have otherwise been possible.
Monetary Contributions
Individual monetary gifts are almost always in the category of charitable contribution. The tax deductibility of
the gift is assumed, but that is not a significant factor in selecting the particular organization which receives a
gift. Individual gifts can take the form of immediate contributions of money, securities, or property, or they can
be deferred ("planned") gifts in the form of insurance policies, trusts, or bequests.
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Corporate giving can be in the form of charitable contributions (a time-honored means of support) or
sponsorship. Sponsorships are a form of corporate marketing which will be one of the few areas for potential
growth in contributions over the next decade. Heightened competition has made every for-profit business more
concerned about the impact their corporate giving has upon the bottom line. Whether they make contributions
or seek sponsorship, the fundraisers must be able to show them how the support (and the acknowledgment of
it) will improve sales.
The increasing emphasis upon sponsorships will require an interesting change in thinking on the part of the notfor-profit organization. Sponsorships are more like earned income than support. The sponsor gets a more
tangible benefit for this money--direct access to potential consumers. A different set of arguments must be used
to "sell" sponsorships than is used to solicit contributions. Large not-for-profits often have difficulty determining
whether sponsorships are the responsibility of the marketing director or the development director. Since
sponsorships and contributions are related it would make sense to share them between the two divisions (when
two exist) and budget for them accordingly. Otherwise, there is a tendency on the part of staff to pursue
sponsorships with less vigor than traditional sales (marketing director) or contributions (development director).
Budgeting and staff reward systems should encourage, not discourage, the pursuit of sponsorships.
Government agencies and foundations provide grant money. Both types of institutions have mandates to give
funds for specific purposes. In other words, they are required to give money away. As a result they are more
receptive to inquiries from not-for-profits than corporations or individuals. The process of securing grant money
is a specialty skill unlike any of the others mentioned here and is unique to the not-for-profit sector.
Product Contributions
Sometimes overlooked as a source of corporate support is the solicitation of products or services. It is always
easier to secure "stuff" from a business than it is to get cash. Quite simply, it costs businesses far less to give
goods than the cash to buy them. If they are products or services the not-for-profit needs, this is a win-win
outcome.
The product or service provided need not be the consumer products produced by the for-profit corporation.
Most businesses have in-house support services or products-fax machines, mail rooms, copy centers, etc.-which
could be made available (on a limited basis) to a not-for-profit organization. These forms of support often prove
exceptionally valuable to not-for-profits.
Conclusion
Not-for-profit organizations need support beyond self-generated revenue in order to carry out their work. The
successful support raiser will have a clear understanding of why individuals or institutions might choose to give
and be able to articulate how support of their not-for-profit would meet those objectives.
The process of securing support is a task unique to not-for-profits; neither of the other two sectors need to do
so. (It is also true that neither would have much success in raising contributed income, goods, or services!) The
solicitation of outside support is the engine which runs the not-for-profit world.
If We Build It, They Will Come?
Introduction
The commitment to organizational mission which most not-for-profit staff members and many board members
possess makes traditional notions of marketing difficult for them. Until relatively recently, many segments of the
not-for-profit world considered the very notion of marketing to be sacrilegious. They have considered marketing
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to be synonymous with "pandering." Given the acknowledged materialism of U. S. culture, the hegemony of
consumerism, and the vital importance which organizational mission holds for not-for-profit insiders, the weight
of that charge should be taken seriously. At the same time, if a not-for-profit organization's work is not reaching
the widest possible portion of the population, it is legitimate to question the expenditure of the resources
devoted to that work.
Consumer-Oriented Marketing
The difficulty stems from a limited view of the potential approaches to marketing. The word marketing is usually
understood in the consumer-oriented mode which is the natural approach of the for-profit world. This means
that the corporation finds out what consumers want and then proceeds to give it to them. This accounts for the
bewildering array of flavors, colors, and consistencies of toothpaste one finds in the supermarket. Given the
centrality of mission to not-for-profit organizations, this approach would be disastrous. The expressed desires of
"consumers" must take a back seat when compared with the not-for-profit's mission if the two are in conflict.
Otherwise, at some point, the not-for-profit will self-destruct.
Product-Oriented Marketing
The widely assumed alternative to the consumer-oriented approach is a product-oriented one. The idea that "if
we build it, they will come" is comforting to true-believers, but this approach is equally short-sighted. It prevents
not-for-profit organizations from growing with changes in society and prevents them from considering new
approaches which might serve a broader segment of their community. (Libraries which do not foresee that
information storage and retrieval will replace books as their core business will become isolated relics of a
bygone era.)
Mission-Oriented Marketing
A real solution does exist. However, like most things which are real, it is difficult and requires great effort to
make it succeed. A mission-oriented approach to marketing looks first at the organization's raison d'etre, not the
current products and programs. It then considers the consumer's wants and needs (those of which they are
consciously aware and those of which they are not). Out of this analysis, it generates activities, consistent with
its fundamental mission, which meet the consumer where he or she is. This is not pandering. It is fulfilling the
highest mission of the organization by allowing it to serve as large a portion of the community as possible. It is
an approach which thus claims a higher moral ground than the product-oriented one.
It is no accident that this process sounds like the standard approach to strategic planning for not-for-profits. As
with any not-for-profit endeavor, the task begins with a consideration of the mission. In this form of marketing,
the relationship is most readily apparent.
An example of this is the Roadside Theatre Company, for years resident in Whitesburg, Kentucky (population, ca.
1,600). Seeing their "target market" as 100% of the population, they commission and produce plays which have
their inspiration in the life of central Appalachia. The RTC is part of the community in which they reside. Their
history is to have sell-out crowds for each performance. The fact that they do not fill their season with
productions of Ibsen's plays (or those of any other major playwright of the past) does not diminish the
importance of those works. Instead, the company is seeking ways to bring together their mission and their
community. The "great works" of the past continue to be "relevant," but reaching the people in their
neighborhood is the more important consideration.
Conclusion
Anyone who attempts to apply marketing principles to not-for-profit activity puts themselves at risk. The stigma
attached to the endeavor, while lessening, is still strong. It is important to understand that there are ways to
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think about marketing which do not depend upon offering unlimited flavors of toothpaste or assume a
"consumer be damned" attitude. There is another way. Mission-oriented marketing may in fact represent the
essence of the purpose for which not-for-profit organizations exist.
Afterword
At the risk of beating an idea to death, not-for-profits are different from for-profits. They have different
fundamental structures and operating principles which require differing approaches to management. Some skills
are, certainly, transferable. However, the differences are sufficient to provide the for-profit manager with a little
humility when approaching the task of managing a not-for-profit. Not-for-profit corporations are not simply forprofits "gone soft."
Understanding this point is important today because not-for-profits are facing a crisis in resources. The
economic structure which has supported the sector has changed radically in the last twenty years. Government
funds are diminishing; there is increasing competition for private gifts; and individuals are needing to earn more
just to stay in the same place, leaving much less money for private contributions.
The volunteer pool has also been radically altered. The same pressures which squeeze individuals out of cash
giving make it difficult for them to give of their time. Not-for-profit staff members are picking up the slack, but
the chickens come home to roost sooner and sooner as the organizational pool of human capital runs dry.
Traditional organizational structures and management techniques drawn from the for-profit world threaten the
future of not-for-profits. To survive, not-for-profits need to work smarter and with more focus in the context of
their missions. While the required changes have been, in some cases, incremental, they had to be made to
ensure that not-for-profit corporations can continue to carry out the critically important work in which they are
engaged.
The voluntary spirit which generated the activities of the not-for-profit sector was, early in our history,
recognized as something which set the United States apart from the countries of the rest of the world. The social
safety valve, think tank, and human service functions which the sector fulfills today are vital to our survival. In a
time of socio-economic transition, this work is threatened. To continue their role in the next millennium, notfor-profits must develop ever more effective means of management. Such means will result from a clear
understanding of their special nature. Maintaining the strength of our nation depends upon the success of our
efforts in this enterprise.
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